IFB86: Graham and Doddsville Superinvestors + An Announcement

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew and Dave to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts now.

Dave:                                    00:36                     Welcome to podcast episode tonight. We’re going to have an interesting discussion. We’re going talk about several things tonight. So first off we’re going to talk a little about the market and the conditions that it’s in today, and so what we’re doing tonight is we’re recording on. We’re going to discuss the market on December 20th, 2018. Talk a little bit about the market conditions. Then we’re going to segue and talk about my buddy Warren Buffet and one of probably the best speeches you’re ever going to learn about in regards to investing. And then we have a listener question that Andrew wanted to discuss towards the end, and then we also have a special announcement that we’ll talk about at the end as well. So why don’t we go ahead and start off by talking about the market conditions. Andrew, why don’t you go ahead and tell us how good or how bad things are right now.

Andrew:                              01:31                     Yeah, it’s really bad right now. Everybody’s freaking out and so I think it’s something we need to address and when I mean everybody, I mean the media, obviously there’s all these reasons for why, why it is basically, I don’t know how the rest of the year is going to end up what I’ve seen historically in December, even if there’s been a strong area you will generally see some selling off in December because people have this crazy idea that you should lock in losses in order to save on taxes. I’ll get like two to a deep into a tangent. That’s one of those stupid things that people use as this conventional wisdom, this idea that you should take a loss to save money on taxes, but so, so you’ll have some of this December selling off. You’ll see as a result of that and we have had so many other factors in play, but essentially where we closed at the end of 2017 last year with the S&P 500, we’re about 200 points under that this year as we record this December 20th.

Andrew:                              02:41                     So represents about like a percent loss and you know, understandably a lot of the people might be discouraged by that. They, you see online all these people who pop out of the woodwork and, and talk about while I should have sold, you know, back the peak, I saw one guy bragging on seeking alpha, saying how he, he sold like half his positions in May. He sold another quarter of his positions in like July and now he’s like strictly in gold and silver coins who knows if it’s true or not, but like to think that he’s, I just, I just want to see where, where he’s going to be at in 10 years and see if he’s got this crystal ball still working for him and if he misses any sort of recovery from however the market will be. Anyway, you had to have some big losses, a lot of losses and stocks.

Andrew:                              03:38                     The Nasdaq is technical as now technically a bear market. You can classify it officially as a bear. Markets last over 20 percent from its peak. You have fears on the trade war with China doesn’t seem like it’s going to lead up. You have the Fed raising rates and you know there was a lot of speculation whether they would wear the. They would continue their planned raise or whether they were gonna kind of hold off because a lot of people perceive the economy is weak and you have a of slowing growth in certain industries and so a lot of different things that are contributing into what we’re seeing in the stock market today. Oh, that was the last thing I want the. There’s like a, another fear of a government shutdown. I remember hearing about this when I first started out in the investing world. You always have this fear of a government shutdown, so forever reason Wall Street thinks that that means they should sell their stocks.

Andrew:                              04:39                     I have the real money portfolio that I’m tracking with the eltetter and we’re depositing money every, every single month. I’m just from the end of November to now have lost 12 percent of the portfolio’s value and whether is this, almost three weeks. So it can be disappointing to see all of this. Does this mean you should sell ’em? And I guess you know, I, I guess I want to kind of tackle that idea by answering the question that came in. If you don’t mind Dave, if we take a little detour call a little audible, absolutely. Go for it. Because that can be an idea to write is a. people might think, okay, this is the beginning of the end. This is an obvious. We’re an obvious recession time period. The market’s been falling. We sought fall in October. It’s falling here in December. This is when we need to get out, right?

Andrew:                              05:40                     That can be. That can be an idea that creeps into your head really, really quickly. So let me read this email and I’ll, I’ll talk to you about why you shouldn’t just have this trigger reflex to sell. Because of what’s going on with market today. So this is from a another Brian, Brian j says, uh, I’ve been listening to all your podcasts will be caught up over the holiday break and this is a dollar cost averaging question. So he says, I am 54 years old, have a good job attorney making 125 k a year. Uh, he’s got a daughter in college taken care of no debt when they graduate. That’s awesome. He says, essentially what he’s saying is he needs to do some catching up. So he has 125 k invested in some stocks. Microsoft is the and some dividend fortresses from the eletter.

Andrew:                              06:38                     And he says, in the next few months I will be getting a $350,000 bonus check for my job. I don’t have any other debt. I don’t have any debt other than a mortgage on my house, which is 289,000 on a million dollar house. And he says, my question, if that money comes in, should I put that all into a stock purchase initially or spread it out over the next year? Uh, I would assume that I would invest in the stocks you mentioned the leather to get me up and running with a proper investment. So you might be thinking, okay, what does this have to do with me wanting to sell? We have to understand the way the market has historically been and the fact that there’s so many different ways you can look at the stock market and you can take little snapshots of the stock market and people will manipulate these statistics to have it justify their narrative and make things either look better than they were or worse than they were.

Andrew:                              07:35                     And you just can’t do that. It’s the, we just have these cycles of there so very long. And you need to look at the history of the market and in the correct fashion. So as an example, that book that I had been reading on and off for quite a while about the bull market and then the.com crash, a kind of concludes with a very sombering kind of pessimistic view. And then looks at investor returns all the way up to 2003 and then talks about how you could have been in 10 year treasuries and done better than, uh, being in stocks. And so for one that’s, that’s very unfair because there’s nothing that says that you need to sell all your stocks in 2003 and get out of the stock market. I’m assuming, and I hope that if you’re listening to this podcast, because we’ve talked about it over and over again, that investing in the stock market is a lifelong kind of thing.

Andrew:                              08:35                     And you know, when you get closer to the retirement, obviously you’re going to have to be pulling some of that money out, but up until then and why you still have money, you should be thinking about keeping that in there in the stock market for a long time. Collecting dividends, looking at dividend income streams and hoping to grow those. So it, you, you don’t want to take a snapshot in any, uh, in any sense. And so like for today, what you’ll see is you’ll see a lot of snapshot headlines. You’ll see people saying things like, um, this is the worst December we’ve ever seen since blah, blah, blah. This is a, you know, you can do what I did at the beginning of the show where I said, uh, ever since last year, January 2017 to now, that’s a negative eight percent. You can use all these different little snippets, but that’s not going to tell you the complete picture and you, you don’t have to be swayed one way or the other to say that this is how your actual results need to be.

Andrew:                              09:33                     So let me give you what’s not a snapshot, but what’s a collection of snapshots that gives you the entire picture. What this is called is a rolling stock market averages or rolling stock market returns. So what that does is instead of just taking one time period, it’ll take many time periods and look at all of them over and over and over again. So that was an example. Instead of just looking at, let’s say we wanted to say, oh, well what does the stock market do in five years? So if I wanted to say the stock market is a place where you can triple your money, maybe I would look at, um, I would stop at 2017, I would start 2012 and I would say look at these monster, like 20 plus percent returns per year. Right? Or if I wanted to write an article that said, this is the time to sell all your stocks, you should be panicking.

Andrew:                              10:30                     Look at the market’s been so terrible and over the long term, the market’s really bad place to put your money. Look, just look at these numbers. And then I could look at something like a 1999 to 2004 from the peak down to the trough. And that could make stocks look really, really bad. What a rolling time frame does is instead of just pick one little snapshot, it’ll take a, like the way video works. I just learned this the other day. So it’s fascinating to me is that it’s actually just all these pictures in like a fractions of a second taken over and over and over and over again. And that creates a video thought that’s really cool. And so if we do that with the stock market, that gives us a better picture of what we can realistically expect for our returns. So if we go back to five year rolling time periods again, instead of just saying we’re going to pick 2012 to 2017, we’re going to pick 1999 to 2004, we’re going to pick 1999 and 2004.

Andrew:                              11:36                     We’re going to pick 2000 to 2005. Then we’ll go 2001 to 2006. So you see we’re, we’re, we’re taking five year pictures and we’re just moving up the stack essentially. And that’s how we’re going to see how the market really does in any given time. We know it goes up and down. We know people get greedy and they get fearful and we know that there’s these big bull and bear markets. There’s recessions and there’s booms. Now, what I want to tell you about this is that obviously if you just do a one year rolling time frame, I hope this is obvious. I’m the returns are so sporadic that it’s basically like gambling, um, as an example. Uh, so I think we should link this up in the show notes. It’s a really great article by the balance and they’re talking about the best and worse in the x returns. And this is just a really small data set, but I’m gives us really good context. It’s 1973 to 2016, so there were plenty of a boom and busts in this time period. You had a worst one year return of four, two percent negative 40 percent. And the best one year return 97 percent. This is for the Russell 2000. So like I said, it’s could go one way or the other in any one given year. If you expand that out to five year timeframes, the worst five year timeframe was a return of negative six point six percent a year. Meaning you lost over six percent of your money every year for five years. Uh, the best five year return was 30 percent.

Andrew:                              13:15                     You expand that out and this is where it gets interesting and this is why I want to make the statement and this is why we can be confident in investing in the stock market even if it goes bad and if we have a year like this year where we feel like we lost all the progress that we gained and that feels like we just took our money and, and lit it on fire. Right? So where it gets interesting is the 15 year and the 20 year time frames for the 15 year rolling time frame. The worst 15 years was still a return of three point seven percent a year. The best 15 year returns was over 20 percent a year. And then for 20 year timeframes, the worst one was six point four percent a year. The best one was 18 percent a year.

Andrew:                              14:06                     What’s the point? So what we can see here is that, you know, I always talk about how 10 percent a year is kind of an average stock market return. And if you look over many, many decades, that’s what you’ll tend to see, but what you see is we compare the different timeframes, like obviously if you’re in the market for one year, you should expect that you can either maybe double your money if it’s a really good year or you could lose half of it, like what we talked about with the one you’re rolling timeframe, heavier money in the stock market for five years. You still have that chance of getting negative returns. You have a good chance of also making a lot of money, but you have chance of negative returns based on what we’ve seen historically since the seventies. And even with a 10 year timeframe, that’s still true.

Andrew:                              14:56                     So if your time horizon is like 10 years, you still, based on, on these numbers, you still have a chance to lose money. But once he gets a 15 and 20 years, there’s enough time for those dividends to reinvest. There’s enough time for these cycles to play out. And there’s enough time for these investments that you make to really compound and grow and kind of recover from, from any, a really tough time periods. And so that’s why you can be very confident if your time horizon is long enough. So I, I would say, unless you have a 15 or 20 year time horizon, at least you, you really have a lot of risk in the market and you could actually lose money and, and people do and they have. So if you approach your investing in this idea that I’m taking a little snapshot, well I took a snapshot from 2017 to 2018 and I lost nine percent.

Andrew:                              15:57                     Yeah. That, that’s kind of part of the game. But if you have a longer term mindset, like I know I’m going to be in for, for the years, will now it’s closer to like 36. So knowing that I know that even though this year was a negative nine percent over, if I stay invested for 15 years, chances are I’m still gonna make a pretty decent return and it probably won’t be negative nine percent a year. Uh, 20 years the odds get even better. So yes, it hurts to see the market kind of a taking away everything that you’ve gained. But like I’ve said in the past and we’ve said before, it’s not really a loss unless you sell a, these things happen and there’s a lot of different reasons why people can freak out. It’s always a different reason every time. But uh, people will, will leave stocks and things will get tough and you just have to.

Andrew:                              16:55                     The thing about getting a return over these 15 and 20 year time frames that we’re talking about is you need to stay invested through it. There’s no way you’re gonna be able to time the entrance in that exit perfectly. So as long as you stay invested 30, you don’t know why they will get better, but it will eventually and that’s the best you can hope for. And so like I said, kind of at the beginning, take it and maybe focus on other things. Still be dollar cost averaging and still be putting that money in. But if you see it continuing to decline, like you’re, you’re, you’re putting in 300 bucks in the market and you check two weeks from now and now it’s at 250 bucks. You might feel like you’re wasting your money, but you’re really not. You just need that timeframe to be long enough for things to recover. And they will. If you believe that the business world will continue to run and people will continue to do business, then it will recover. So what that has to do with the question is, I noticed A:

Andrew:                              17:57                     Brian was talking about putting in a large amount of money. I’m much more than than what he had now, 54 years old. And so that’s why I would say, you know, obviously not personalized advice. If it fails me and my shoes, if I knew that I was retiring trying to retire at 65, knowing some of that data, like the fact that, well even in a tent, a tenure rolling time period, I still have a chance of losing money over that whole 10 years. That would probably motivate me to go more into bonds or maybe even pay off the rest of the house rather than putting that money in the stock market. If instead I knew for a fact that I was not going to need to depend on this $350,000, let’s say I’m very financially secure, this money, I’m going to let it run for 15 years and I’m going to live from 65 to 70 on some other money. My other nest egg, whatever I have then sure. Then I would put it in the market and do the dollar cost averaging thing, a break it up over 10 months. Like, like we’ve talked about another dollar cost averaging episodes.

Andrew:                              19:09                     That’s something to really keep in mind and the SPY, the, the holding period and that, that timeframe is so, so important. That’s, that’s something to really keep in mind and something. It’s obviously something. Keep in mind, I’m always very risk averse. I don’t like losing money. We had talk about margin of safety, emphasis on the safety. And so even though you know you can find great stocks, something like a 10 year timeframe might not be enough to let any sort of negativity, a, any sort of a stock market, crashes, any sort of the bear market that might not be enough time to recover and you could lose money in that sense. The thing I think of is, you know, having a paid off house from a finance, personal finance kind of standpoint, not only will that help you probably sleep better, the air in your house probably smells better when this paid off the imagine the money now that you support in your mortgage, you could suddenly put towards the market and you can slowly dollar cost average. That. Right. Dave and I don’t really like to talk about the market as a whole or the evaluation of the market, but we have mentioned how historically is very expensive. It’s still pretty expensive. You look at a price to earnings, Shiller PE ratio, and you compare it to where it’s been over the past hundred years or so. Stock Market is still pretty expensive, so there’s a lot of reasons to not be throwing a bunch of money in. If you have a short timeframe,

Andrew:                              20:44                     Longer term, great to dollar cost, average, great consistently be putting money in and the kind of pre Wac is that to that is having that 15 to 20 year time horizon where I’m not going to pull that money out. I’m not going to need it to survive. I’m not going to need to sell it to to to put food on the table because I got laid off or had some other sort of emergency that needs to stay there and it needs to be given that time to grow and to be able to recover and that’s I think, something not talked about enough about the stock market. But if you start looking at it like taking this huge, this very long video and instead of taking one snapshot like they do in the media, look at it and look at the big picture. Then you can feel a lot, lot better and it can be like, you know what?

Andrew:                              21:32                     Yeah, 2017 didn’t go the way we all thought it did start out strong and kind of smothered out being alive. That’s one snapshot. I’m looking at the bigger picture and that time horizon is going to be great, especially once, you know, once my dollar cost averaging has run its course and it has been going for 15, 20 years, that’s going to look really, really nice. Uh, unfortunately it’s takes a lot of patients and you don’t see it overnight all the time, but that’s the way to do it and that’s the way I would approach the market, you know, if I had a windfall, that’s how I’d approach it today and that’s how I’m really approaching this rest of this 2018 year there’ll be kind of exciting stuff lined up for 2019, but really going to be kind of disconnecting from the market the next week or two and just kind of enjoying life I think. I think that’s something that’s really, really important.

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Dave:                                    22:40                     Those are some great, great thoughts. A log that I’d like to throw in the fire if I could of course, would be. So something that I heard a, I had a discussion several times actually with the mortgage banker that I work with when I was at wells Fargo and some advice that he gave me when I had a customer come to me one time that had a larger sum of money and they were kind of wondering what they should do. And his suggestion was to look at what your mortgage rate was and compare that to what kind of return you could get based on your risk profile. So if you are somebody that is like, you know, I don’t want to lose a single penny, I just want to put this in a money market account or you know, find some bonds or some other treasuries that maybe I could invest in and euro, say your mortgage on your house was two and a half percent and you could find an investment that could make more money.

Dave:                                    23:45                     He said them put the money in the investment. He said, if you cannot find it in an investment that is better than pay off the house, and I thought, wow, that’s actually pretty good advice. So that’s something that I’ve always kind of kept in my head whenever people have brought that kind of idea to my attention. The other thing that I wanted to throw out there as well is our time horizons are changing and when we think about. So Brian was talking about he’d like to retire by the time you’re 65. So no, he didn’t say that. He has to keep in mind. What’s that? He didn’t say that. I guess I implied it. Oh, okay. Oh, I’m sorry. Um, so let’s say that Brian wants to retire in 10, 11 years, so he’s going to be in a 65 age range ish. So let’s say he wants to do that depending on what his health is.

Dave:                                    24:40                     If he’s a pretty healthy guy, he’s got a real outstanding shot of you living to 85, 90, 95 years old. So he’s really realistically looking at 30 years of his, of his retirement that he’s going to have to fund in one shape or form, whether it’s through a combination of his portfolio currently or the one he’s building a social security or any other sorts of assets that he has. So that’s a long time to think about that you have to live off of. And so the. The advice or these suggestions that I’ve been reading a lot about lately is maybe not shifting the allocations to bonds as early as our parents used to do or even our parents parents used to do because the with the increases in medical care and our health and just the overall general awareness of our living conditions have improved.

Dave:                                    25:41                     And so we’re living longer than we used to before our grandparent’s generations. And so having to have that money for you to be able to do the things that you want to do. It’s people are working longer, people are retiring later and some of that is because of that very fact that they’re living longer and so they have. They need more money for a longer period of time and so I guess that’s something to kind of take into consideration as well. Of course I can’t tell you what to do. I guess if I was in your shoes, depending on where you were with any sort of other assets, I guess that would be something that I would strongly consider would be deciding on whether I want to put something in something that’s a lot risk, a lot less risky, like treasuries slash bond slash money, market funds, any of those kinds of things or if you want to put something into the stock market and it really kind of depends on where you, where you are with your risk profile.

Dave:                                    26:36                     So I guess that was kinda my thought was the mortgage idea as well as the investing longer time period. So that’s my thought.

Andrew:                              26:46                     Yeah, I completely agree with you. If you can keep that money aside and you’ll need to draw from it. If you can do that for at least 15 years, I think it’s a no brainer. Get yourself some stocks, especially if you’re following the footsteps of a super investor.

Dave:                                    27:02                     All right, so now that we’ve talked a little bit about the market conditions and answer the question, we’re going to segue into the speech that I alluded to earlier, so we’ve talked a little bit about this before, but we’re going to give you a little bit of a preview. Andrew and I have a course that is going to be coming out and this is going to be one of the modules that will be discussed in the course and we thought we would just give you a little teaser on the course and the module with this discussion on the superinvestors of Graham and Doddsville.

Dave:                                    27:32                     This is a speech that Warren Buffet gave at the 50th anniversary of the security analysis book. David Dodd was in attendance. Unfortunately, Ben Graham had passed, so he was not there. But, uh, this is a fantastic speech that a warren gave that talks a lot about some of the different investors that we’re following the value investing principles of Ben Graham. He also talked a lot about coin flipping. You also talked a lot about the efficient market hypothesis, which Andrew and I have discussed at great length and so I thought I’d talk a little bit about the speech. The speech is was actually originally recorded and then it was put into written form and you can read it at your leisure, which I will put in the show notes so you can read it at your leisure is a fantastic speech and it really lays out all the great ideas that Buffet is known for.

Dave:                                    28:30                     His witticisms, his humor, his intelligence, his kind of folky folkiness and his just kind of general, using this very easy to understand basic principles that are kind of very logical and really make sense. And he just lays out his ideas in such a fantastic way. And I just love how he talks about all the different aspects of value investing and how he thinks that his superior strategy to employ when you’re investing. And as we’ll talk about a couple of the investors that he mentions in the speech. All the superinvestors that he talks about in the speech are people that were either worked directly for Ben Graham or were proteges of him in related fields. That ended up kind of following what Ben Graham was teaching either through the Intelligent Investor or Security Analysis and if you’ve not read either one of those books, Intelligent Investors. One of the books that Andrew and I have talked about many, many times and one of the episodes that we talked about, our favorite investing books or books that you should definitely read.

Dave:                                    29:46                     A intelligent investor is going to be very high on the list and if you can say this, it’s definitely what the easier of the two to read. Security analysis is a much more technical book and there was a lot more jargon and a lot more numbers and things of that nature. It’s a little more difficult of a book to read. Intelligent investor is more about the theory of investing and there are two chapters in there that are absolute must reads. If you’re even considering looking at value investing as a investing strategies. That will be Chapter Eight and Chapter Twenty and Andrew and I have discussed both of those and previous episodes that I’ll put links to those as well so you can kind of get an overview of those chapters. So the speech talks a lot about these different great investors and the coin flipping episode as well as the efficient market hypothesis. So the first investor that he talks about is Walter Schloss and I’m gonna actually have Andrew talk about Walter [inaudible]. Andrew’s read about him and he has a little bit better insight to Walter than I do. So Andrew, why don’t you tell us a little bit more about Walter.

Andrew:                              30:55                     Yeah, just a little bit more insight than you. I’ve read a couple of his articles, so that makes me an expert. All of these guys, all of these super ministers were were I like how we’re lagging by like two seconds. The Internet’s already on holiday break. So both of these, all of these super investors all beat the market by insane amounts. You can look up the article that day is going to link up a and you can run compound interest calculator calculations on them and you’re going to see like we’re talking magnitudes of scale, uh, of creating wealth over what you could have made from just investing in the stock market. So it’s not just warren buffet, it’s not just a Warren Buffet and Ben Graham, but everybody that Ben Graham taught at a school in Columbia, a lot of those guys, whereas students there and obviously having read his textbook, the Security Analysis, the Intelligent Investor and kind of blazing their own path through there.

Andrew:                              32:00                     Walter Schloss was, was one of the early ones I believe. So his returns were just incredible. He, what I found fascinating about him was his big argument was all about the balance sheet and price to book. And so I, I really enjoyed that. So he, you know, he was writing articles back kind of discussions and the kind of debates he was having a, like there’s an article posts with some magazine, I don’t know if it was Forbes or another where he’s kind of going back and forth with this guy and they’re kind of arguing about book value and, and, and you know, there’s this argument where there’s like an old economy and the new economy, you know, at the industrial economy, which was very capital intensive and now you have a new economy, which we touched on that very, very recently, right, with, with this idea that, uh, you don’t need as much capital, you don’t need big factories.

Andrew:                              32:59                     And there are different business models. Funny enough, I mean, that was a discussion that was happening back when Walter Schloss was in his heyday making them, making big returns using Ben Graham’s teachings. So he, you know, a lot of the stuff that you see on Wall Street, it’s not new and these are discussions that have been had for a long time. His basic principle, if you could boil it down from, from what I gather, I don’t, I don’t believe he wrote a book and so that’s why I’m just the, there was some resource that they’ve actually showed me where they had like photocopies of some of his old articles so you can kind of glean from some of those things how he invested in and what his philosophy was. The big thing for him was, you know, even if a stock has earnings that wasn’t necessarily as great as some of the other businesses.

Andrew:                              33:59                     If a stock has a strong balance sheet and it’s trading at a discount to book or have a very good price to book value, then he prefers that rather than a stock with, with strong earnings. Because as Walter Schloss kind of says, earnings can fluctuate and they’re not as reliable and they’re not as consistent as the balance sheet. And he also makes the argument that, well, yes, some of these businesses might have lower earnings because yes. Um, you know, they might be very capital intensive. You might need to invest hundreds of millions if not billions of dollars on equipment. And all of these sorts of things, but he also argues that that can be a big advantage because a lot of other competitors might be discouraged from getting into that business and then as a company kind of moves through a time period where, where that’s where they’re struggling with earnings, uh, if there’s less competition than they can kind of power back from that and really recovered in a nice way and he can make nice returns on his investments. So he’s big on, on margin of safety, really using like a very balanced sheet based price to book based kind of Valuation Strategy. And it worked really, really well for him.

Dave:                                    35:16                     Yeah, he had absolutely really fantastic returns through the course of his time and a buffet when you referenced him in the speech, I believe the time period that he was looking at, he said is annualized returns were over 21 percent during that time period, which is pretty freaking awesome. So, uh, that’s nothing to sneeze at for sure. So that’s more than just a one or two year period, I believe it was, uh, 18 years over that time period. So that’s, that’s pretty fantastic. Uh, the cool thing about a Walter to, as he’s a very under the radar, he’s not talked about a lot, there’s not a lot of fanfare about him, but he was a fantastic investor, a investor that I wanted to talk about a little bit bizarre. None other than Charlie Munger who has been a warren’s right hand man through the last 56, 57 years. So a kind of a funny story. Charlie, graduated from Harvard law and he worked as a lawyer for many, many years. He met Warren and they kind of became friends and then during a conversation a warrant told Charlie that law was a fine hobby but that he could do better. So I thought that was kind of funny.

Dave:                                    36:24                     I guess he was right now. Charlie was very concentrated investor. He, he managed a WESCO financial for quite a number of years before that was kind of folded into the Berkshire Hathaway portfolio and he’s still a managing partner of the daily Journal, which is a newspaper that, a company that owns a bunch of newspapers. And I believe his portfolio with them is a grand total of four whole company’s a 56 percent of the portfolio is with Wells Fargo. The other 44 percent is balanced between three of the companies among them, US bank and Bank of America. And I believe the fourth one is a company in Korea, which I’m not familiar with. But uh, it’s pretty amazing that he’s been able to, you know, have the success that he’s had through his time period with Warren as well as on his own. And he’s done it all with just a very, very concentrated portfolio.

Dave:                                    37:23                     And the thing with Charlie and we were talking about this earlier about kind of the time and how that’s really the, as Andrew was talking about the different rolling periods and the 10 year, the 15 year, 20 year periods. The key is the success of a lot of these guys. And this kind of segues into what’s going on with the market right now. And that’s why this is so relevant. And that’s why learning the history of these guys and what they could teach us and how we can apply these principles to our investing now as well as in the future in regardless of whatever’s going on in the market at that time. It obviously has an impact on how we think about what we’re going to do at that particular time. But I’ll give you an example. A war, I’m sorry, Charlie bought Wells Fargo in 2008 when the market was obviously taking any bought it for $8 a share.

Dave:                                    38:17                     I mean that’s just mind boggling to think about that Wells Fargo was selling for $8 a share. Now granted banks were a huge target of everything that happened with the market meltdown back in the one eight. Oh nine time period. But he bought it for $8 a share and now it’s selling for 50 and a 48, $49 share arrange. So that’s about 160 percent gain over that time period. So not too shabby. And is also been collecting dividends over that time period. And you know, he has no plans on selling the company and even though there they’ve taken a hit recently just like everybody else has. So I guess the point that I’m trying to make with that is, is that, you know, you could find a company and you can invest in it and you can use that to help you grow your wealth.

Dave:                                    39:09                     And it really comes down to time and patience. Those are the two main ingredients. And that is something that Charlie has in spades. And I’ve heard Warren talk about him and weren’t always kind of likes to put himself down or kind of, you know, downplay his intelligence. And I think Andrew and I would both agree that he’s quite the brilliant guy, but he talks about charlie being really the only genius in the room when he talks about the two of them. And Charlie is fantastically smart and if you get a chance, there are several speeches or different toxicities had that are recorded on youtube that you absolutely need to take the time to listen to. And they’re fantastic insights into how he thinks and the ideas that he has. And I can put some links to some of those in the show notes as well, but you know, his ideas on lattice work, of mental models and how you could take different disciplines to help educate yourself is just fantastic stuff.

Dave:                                    40:08                     And you know, he’s not talked about as much as Warren because he’s a little bit less showy, I guess you could say he’s a little cranky to be blunt. It can be a little cranky and so sometimes he can rub people wrong the wrong way a little bit, but he’s a fantastic investor and that’s one of the other people that that weren’t illustrates is one of the superinvestors of Graham and Doddsville. So you know, these are some of the insights that you can get from studying these people. And the whole purpose of the speech that Warren gave and the reason why he talks about these investors is not to illustrate how great these guys are. He’s showing, he’s showing you that value investing. If you take the teachings of background as your foundation and then a branch off from there that every single one of us can use these to become value investor, become super investor.

Dave:                                    41:03                     We can take these simple ideas that these guys talk about and we’ve talked about and they can help you grow your wealth over time and the stock market and that’s really what it comes down to and that was the whole point of the speech was to illustrate that you can do it too. You can, you can do it. It’s out there for you to do it if you want to and you don’t have to strictly do everything these guys do. One of the things that’s really interesting when you study each one of these investors that weren’t talks about in greater detail almost. There’s almost no overlap in the portfolios of what the companies they owned. So which to me is kind of startling because that means that there’s different shades of value investing, so you don’t all have to buy Walmart. We can buy other companies to get to the same place. We all want to go by just following the principles of bank ram and using the different outshoots of things that we learned from Warren and Charlie and all these other great investors, so that’s really the benefit that you can get from warning and listening to the speech.

Andrew:                              42:08                     I think that’s why we wanted to bring it up and something that we’ve been working on lately and trying to get people to get you that push to at least try value investing and see if it works for you and see if you can pick those skills up. I know the stock market’s very intimidating. We just talked about how it’s gone through very too much less time, but these are skills you can learn and pick up and try to emulate the superinvestors and and try to make fantastic returns for yourself and you can be completely dependent on yourself. Build that skillset. So the course that Dave mentioned, it’s something that. So we, we had it open for enrollment last year. We closed it a or re and we’re reopening enrollment for all of January 2018. So I believe this episode will go live sometime in the first week of January, so I say 2018, 2019, so all of January 20, 19 you’re gonna be able to enroll and then we will close enrollment off again.

Andrew:                              43:09                     So it’s 23 modules and really gets you from the very basics to starting to really dive into value investing. So we began with some personal finance basics. First two modules, we talk about stock market basics, uh, go in depth into the stock market, the history of it. Talk about what’s a stock, what’s a bond. So that’s the next five modules. And then we talk about some stock market strategies. So these are the ones that are kind of differing from value investing. Talk about, uh, my favorite topic, dividend stocks. We also talk about, the dividend discount model, which is a evaluation tool that’s not necessarily value investing based but is used, and it’s really taught in, in um, in schools. you have qualitative quantitative analysis. We talk about Beta and how the way that a lot of Wall Street looks at risk is not really the same as, as real risk.

Andrew:                              44:11                     And then obviously we talked about the superinvestors and then we get into really nitty gritty kind of value investing stuff. I try to take you in as if you never read a single thing about value investing and we go in depth and so they’ve had some fantastic modules in there. He talks about calculating intrinsic value. He has a stock checklists, I believe that was yours. One of us made the modular stock checklists. I kind of go through my process, uh, obviously talk about margin of safety, emphasis on the safety that we always talk about, and also went to sandwiches I think really, really key. So it’s, it’s the investing for beginners masterclass. It’s something we opened last, uh, I think it was over the summertime we closed it a or if you want to check that out, I think this is a great time to do it.

Andrew:                              45:05                     Start the new year, right? Worry less about the results and worry more about giving yourself the skills that can eventually lead to results. So if that’s something you’re interested in, you can just go to the products page on my website, einvesting for beginners.com. You can also just subscribed to the email list and you’ll get updates and I’ll be emailing in January about the course when it’s, when we’re closing enrollment, all those sorts of things. So we’re hoping, you know, if, if that’s something you’re interested in, if either a, you’re scared about the market, be you’re just unsure about where you are or see this idea of following in the footsteps of the super investors who’ve made a ton of money in the past, kind of speaks to you. Then this could be a really great tool that gets you on your way. And like I said, I mean we’re closing enrollment so it’s kind of do or die.

Andrew:                              45:57                     Get in there before it’s too late. So I know in podcasting, obviously it can take some time before you listen. So we’re hoping by having the enrollment period four month, that allows enough people who kind of need to catch up on the episodes to catch up and enroll in that.

Dave:                                    46:17                     All right folks. Well that is going to wrap up our show for tonight. I hope you enjoyed our discussion on the market conditions and answering the question as well as our brief discussion on the superinvestors of Graham and Doddsville and our new announcement. So I’m going to go ahead and sign us off. You guys. Have a great week. Invest with a margin of safety emphasis on the safety and we’ll talk to you guys next week.

Announcer:                        46:41                     We hope you enjoyed this content. Seven steps to understanding the stock market shows you precisely how to break down the numbers in an engaging way to go away with real life examples. Get access today at stockmarketpdf.com. Until next time, have a prosperous day.

Speaker 5:                           47:06                     The information contained is for general information and educational purposes only. It is not intended for a substitute for legal, commercial, and slash or financial advice from a licensed professional review. Our full [email protected]

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